Updated on 02.25.12

Balance Your Checkbook as Often as Possible (55/365)

Trent Hamm

You should always know what your checking account balance is.

Let me repeat that.

You should always know what your checking account balance is.

That includes outstanding payments you’ve made that haven’t posted to your account yet. That does not include income that hasn’t been deposited yet.

The more you deviate from this, the more you’re begging for things like overdrafts or situations where you go to an ATM and unexpectedly find yourself unable to withdraw anything due to insufficient funds, both of which can be financially disastrous.

I now keep good track of my checking account, but in the past, I didn’t do that very well and I came incredibly close to overdrafting several times. I didn’t do this on purpose, mind you. I did it because I didn’t balance my checking account nearly as well as I should have, and without some real luck more than a time or two, I could have been faced with some serious charges.

Balance Your Checkbook as Often as Possible (55/365)

There are two simple tactics you can use to make sure your checking account stays above water at all times.

First, maintain a constant “buffer” in your checking account. That means that you should consider any balance below a certain amount a serious financial problem that needs to be rectified immediately. I have kept a buffer of at least $500 for years now, just as a safety measure.

Second, keep some sort of physical track of every transaction in and out of your account at least until it appears on your statement. One way to do this is with a checkbook ledger. The method I use is to simply keep track of every transaction that has not yet posted to my account on a pocket notebook so that I can compare them to the balance of my checking account online whenever I need to do so. Checks are the real challenge here – they often take several days to post. This is another reason why I prefer online bill pay, as it makes such balancing much easier.

Why don’t I suggest that everyone use a checkbook ledger? Checkbook ledgers are really good ideas if you write a significant amount of checks each month, but I – and many of my friends – rarely write checks at this point. We use online bill pay and other such services. The biggest lag that I often see with transactions in and out of my account are point-of-sale ATM withdrawals, which can sometimes take a couple of days to post.

The key is that you should be able to quickly identify your balance at any moment with jut a bit of simple addition and subtraction. This is particularly important if you don’t have a large buffer in your checking account or if you’re about to make a large purchase.

Another note: never assume that money will arrive in your checking account on the promised date. In fact, if at all possible, you should never make financial moves on the assumption that money will arrive in your account tomorrow.

Not only do such transfers often happen a day or two slower than you expect, but the banks – if given an option – will often order transactions in a way that will cost you money.

I’ve had automatic transfers and paychecks show up in my account days later than expected. I’ve had some transfers never arrive and eventually found myself contacting banks to get things straightened out. I even had one lengthy disputed bank error that eventually led me to change banks.

Do not rely on money that’s not sitting in your account yet. Instead, know your balance and rely on that to the best of your ability. This will keep you above water, no matter what.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

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  1. Alice says:

    Good post!

    I’m looking for a free electronic checkbook register – I had a great program, but it only worked with pc, and now I’m on mac. Recommendations appreciated! I don’t want something like mint, my goal is to have the information on my computer, and not in the cloud someplace. I’m looking for something very simple – all I want it to do is act as a check register and nothing more.

  2. Vanessa says:

    @ Alice

    I know you asked for free programs, but I use Quicken Essentials for Mac, which was recommended in a comment I read on GRS and I’ve been very happy with it. It doesn’t have as many features as the Windows version (which I LOVED and used for years when I had a pc). But as a basic check register, it does a good job. I paid around $20 for a used copy off Amazon. It has horrible reviews, but that is mainly because it lacks so much compared to the Windows version.

  3. Mary M says:

    I use the note side of the page in my Moleskine page a week pocket calendar as my bank acct register. I started using this when I kept running out of the registers that come w my checks. It is so annoying that my landlord is the only check I have to write every month, but with a ton of check card purchases this system works for me bc I always have the Moleskine in my bag.

  4. Robert says:

    I use Excel to track my checking account. Every deposit, withdrawal, transfer, check, etc. goes into a spreadsheet and is categorized. The master tab shows me how much I earned and spent each month, and a breakdown of where the money went.

    What really makes this sheet work for me is my outstanding checks tab. In addition to keeping track of any check or debit card purchase that hasn’t yet cleared, I also track upcoming bills for the next 8 weeks (4 pay periods). Most of my bills are fixed so I know about how much they will be to the penny. The ones that can vary (electric bill, for example) I over-estimate.

    At a glance I can tell not only know how much money I currently have available, but also about how much I will have in 2 weeks, 4 weeks, 6 weks, 8 weeks.

    If I have a large, irregular bill coming up (car insurance payment, annual HOA fee, etc.) I see it hit the figures 2 months in advance and know to dial back my spending to cover it in full. I can easily cut back on my weekly allowance (which I use for groceries, gas and spending money) or even skip one of my automatic transfers to savings if necessary, but I almost never need to do this.

    To complement my spreadsheet, I use teh calendar function in my email client on my computer to track bills as meetings. I set up monthly bills to pop up on the same day every month, with a heading like “Mortgage – $xxx”. The few bills that come in every 2 or 3 months and the handful of annual or semi-annual bills also get entered as meetings.

    When I update my check register spreadsheet on pay day, I move all of the bills up a period (from 8 weeks out to 6, etc.) and add any new bills at 8 weeks that appear in my calendar. Bills due before the next pay check are moved into the Open Checks heading and treated as if I’ve already written the check, so I don’t mistakenly see the money allocated for them as “available”.

    And thanks to free utilities like Dropbox, I can access the latest updated spreadsheet on my home and work computers, my smartphone and my iPad.

    My system’s possibly a bit OCD for most people, but it’s not that hard to use once I put it together and got used to tracking everything. And since I created the spreadsheet I’ve not only not been late on a single bill, but I’ve also been able to boost the amount I put into savings because I find myself a lot more restrained on making purchases.

  5. Kacie says:

    I don’t balance my checkbook and haven’t for years. I recently set up a new system where all of my bills are paid out of my brick & mortar checking account, and all my other spending (groceries, fun stuff, clothing, whatever) comes out of my ING account.

    I just log in regularly and I know where I’m at.

    My husband uses either cash or credit card, but he spends so incredibly infrequently.

    It works for us and we don’t overdraft, and I’m thankful for that!

  6. valleycat1 says:

    Alice #1 – It is very simple to set up a spreadsheet yourself that functions as a register, and you can set up the ‘balance’ column to automatically calculate (formula that is previous row’s balance+credits-debits). In Excel, it will usually auto-complete text entries already used once, which makes recurring payment entry quick. I’d bet there are free templates out there you can download if you don’t want to set up your own. As Robert demonstrates in his response, you can customize a spreadsheet to any level of detail you want.

  7. Jen says:

    Cute picture!

  8. Barb says:

    like Kacie, I do not “balance” and have not in years. I have a bill account and a spending account and check both daily online. I dont write checks so I always know where I amat.

  9. lurker carl says:

    Just record your credits and debits in the checkbook register. Add or subtract as required. An Excel spreadsheet should suffice on either Mac or PC.

  10. Laura says:

    I use Mint.com to keep up with my spending. I can connect to all my accounts. I have it send me alerts of various kinds that help me make sure I don’t overdraft. So I don’t balance my checkbook, but since everything is paid electronically, I have a record of what’s coming and going. I write maybe 3 checks a month, and take out cash a couple of times a month and I make note of those. Usually everything works out.

  11. Nancy says:

    I never balance either. I have 2 checking accounts at my bank which I can access online. I use one for auto deposits and auto payments and the other I have actually named “Write Checks.” If I have to write a physical check, I electronically transfer money to that account and write the check. That way I’m not waiting for a check to clear or forget about one I’ve written and then overdraft. Good thing too since my sister has not cashed the Christmas check I sent her kids back in December, grr…

  12. Rebecca says:

    I still use the old fashioned checkbook register, and handwrite in all debits, credits, and the few check# I write. I check it against the credit union’s website once or twice per week. I put a little checkmark next to each one in the checkbook as they clear. Periodically, I highlight a balance with a yellow highlighter and write “correct” next to it.

    Yes, it’s old fashioned, but it works for me, and I never bounce a check.

  13. Marc says:

    Trent – I think this would go in my top three most important TSD posts of all time (and I’ve been a reader for years now). I would argue that unless you or a loved one have health issues, knowing your checking account balance is THE most important thing you can check on a daily basis. Before I got my finances in order, I was scared to check my balance more than once a week because I didn’t want to see how little money I had to work with. I would just stick to credit cards if I thought I was getting low. That created a debt spiral that cost my wife and I two years and $20k of major debt payments. Now that I know my balance at all times, I can easily say “let’s hold off on buying ____ until we get paid in a few days.” Of course, this ignores our automatic transfer into savings every pay period. Thanks for changing our lives Trent!

  14. Roberta says:

    I’m with you on this one. I check it every day! I use the paper check register, old notebooks from school my kids didn’t completely use up and a free calendar. All bills and the date due, whether I pay by check or auto deduct get shown on the day due in red on the calendar, and paydays in black. I look at today’s balance, deduct any checks which haven’t cleared – I don’t write many so that’s a small number. I track all the debit card uses in the old notebook and just write the total in the day they clear, and use one line in the check register for all those. This gives me a quick look at where we spend so I can adjust that as needed. I take the bank balance adjusted for uncleared checks, and then I go through the calendar, adding up due-outs for the rest of the month and paychecks due in. I also allow a certain amount per day for groceries, dry cleaning etc. Gives me a feeling on a daily basis where we stand, and it’s a game to say – OK, how much of that amount can I have left at the end of the month for extra payments on credit cards or to put into savings. My hubs, on the other hand, never wrote a thing in his register since he kept it all in his head. That would make me crazy, but my way has worked for us for more than 27 years so I say stick with a good thing!

  15. Patricia says:

    First, That statement sounds totally punitive.

    Second, You are so direct and correct.

    This is a major problem I have and I need to start paying attention. And not just my transactions, but I need to start looking out for fees and other drafts I may not remember or know of at the moment.

    Yes there a fees listed on my account that I have no clue about. Some have been less than a Dollar, I never charge less than a dollar.

    I am a debit card queen and some strange fees and charges have popped up. But after reading this blog, I need to stop whining about it and take action.

    Starting today…
    (1) I will not use a card if I don’t know the exact balance.

    (2) I will not use my debit card for purchases less than $25.00.

    (3) I will note where my routine debits are made and watch for strange posts. I will report them to my bank ASAP.

    (4) I will be harder on myself with my accounting and stop rationalizing what I did not know. (It’s bad when a blog has to teach you this!!! :))

  16. Chris says:

    I have not balanced a checkbook in over a decade… Honestly I don’t understand the point. In my case my finances got significantly better when I stopped trying to track things with pen & paper. I use my bank’s website, which I can access on my phone to check my balance almost daily, and have updates text / emailed to me. I write 2 checks a month, Rent & Car Payment. All of my other bills are scheduled online through my bank, with just 3 taps on my phone I can see my balance, what bills are scheduled for the week, or transfer money.

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